Insurance Gets Hip

Prior to the nightmare of Sept. 11, the insurance industry
seemed like a conspicuous province of the boom days of the 1950s.
With GI Bill-educated warriors entering the white-collar world, and
their families cashing in war bonds and sprawling into
subdivisions, the country brimmed with new money, new earning power
and a new sense of household propriety. And the insurance business
boomed as well, selling peace of mind and security.

Insurance was something few ever expected to see advertised to
the viewers of MTV.

Yet, if you tuned in recently to the erstwhile music network, or
ESPN or Comedy Central, you might have seen the stylish, fisheye
spots for State Farm, the Bloomington, Ill.-based insurance giant,
which had $78 billion in total assets in 2000. â€œLike a good
neighbor,â€? State Farm agents have stripped down to their
shirt sleeves to hang with twentysomethings, skateboarding with
them, scratching at the rave, browsing at the fashion-victim salon.
On the Web, cruise into a young adult targeted Web site, say,
Rollingstone.com, and you may behold a giant pop-up ad that
presents a streaming progression of trendy young people, under the
copy, â€œNo matter who you are or what you drive â€¦ there
is a State Farm agent for you.â€? The Gen X reps â€” overly
made-up, vinyl-adorned poseur, the guy in dreads, the white punker
also in dreads â€” appear in tandem with an automobile that
matches their own offbeat look.

In terms of iconography, this is not the intrepid insurance
person of the myriad home and casualty ads of the past 20 years,
showing up after the horrible storm, or the quirky, comedic pitch
for the lowest auto insurance rates in the business. In an industry
that has long put on a somber, hyper-honest face, State Farm may be
the first company to try to put on that sardonic grin that seems
the province of Gen X.

â€œWe do life solutions, and we do that by following life
stages,â€? says Melinda Mueller, marketing manager at State
Farm. â€œA first car. Graduating from college. Getting your
first job. Getting married. You start buying life insurance when
you have a baby. Most renters happen to be in this younger group,
but only 3 in 10 have renters insurance. Statistics show that
people are getting credit cards and managing their finances younger
and younger. But as we analyzed our portfolio business, and
compared our market share and market penetration in this group, we
saw a great opportunity.â€?

It's the old business chestnut, via baseball metaphor, of
â€œhitting 'em where they ain't.â€? And as insurance goes,
Gen X is a relative void, simply because it's entering such stages
for the first time, and later in life than previous generations.
According to U.S. Census Bureau data, today's young adults are
getting married later: the median age for men rose to 27 from 22 a
generation ago, and to 24 from 20 for women. This behavior pattern
is likely the result of the 40 percent divorce rate of the 1970s in
which they grew up. Coming of age in the era of downsizings, they
consider jobs less careers than the means to cover this year's
rent: the median stay at jobs by workers in their early 20s has
been halved since 1983, from 2.2 years then, to 1.1 today,
according to the Bureau of Labor Statistics. Although skewed by
their time in the work force, Gen Xers' average investments in
savings accounts, IRAs, mutual funds and stocks all stood at around
half the amounts of Baby Boomers', according to a 1998 report,
â€œGeneration X â€” A Market in Its Prime,â€? by life
insurance industry association LIMRA International.

At worst, this does not indicate a market with the inclination
or wherewithal to invest in financial support services. In the
related life category, as of 1998, according to LIMRA, 55 percent
of those age 25 to 34 were protected by some type of life
insurance, but individual life insurance owned by 25- to
34-year-olds had dropped a precipitous 9 percentage points since
1992.

Still, Gen Xers have shown more of a propensity to save what
they do make for the future than Boomers. According to a 1999
survey by the Employee Benefit Research Institute, 68 percent of
Gen Xers had begun saving for retirement, an impressive rate,
compared with younger Baby Boomers (68 percent) and older Boomers
(77 percent), and a higher rate than earlier generations, according
to LIMRA.

At the same time, a cabal of interested parties have done much
to flip this general have-not-but-forward-thinking status for
ulterior purposes. For all the hay George W. Bush made last year
about re-channeling Social Security dollars into private investment
portfolios, such privatization has been the decade-long mantra of
PR praetorians masquerading as Gen X advocates. Largely
underwritten by financial service giants, these fronts beat an
incessant drum of Gen X's festering disgruntlement over the
â€œPonzi schemeâ€? of Social Security, to call for the
scrapping of current fiscal safety nets in favor of a private
investment sluice.

If true, this could well indicate a young adult market that
would be friendly to a broader bourgeois phalanx of financial
services, from investment brokerage to insurance â€” but it's a
big â€œif.â€?

As University of Minnesota political science professor Lawrence
Jacobs pointed out in a comprehensive 1998 analysis of this
â€œGen X lobby,â€? its slanted questions â€” say, the
verity of UFOs versus the longevity of Social Security â€”
don't hold up to more comprehensive research. Looking across six
polls in the mid-1990s, Jacobs found that â€œlarge majorities
of between 58 percent and 71 percent opposed balancing the budget
if it meant cuts in Social Security â€¦ Despite breathless
media accounts of intergenerational warfare, the younger cohorts
were as defensive of Social Security spending (if not more so) as
the oldest in 1993, 1995 and 1996.â€?

Still, the media onslaught by the Gen X lobby played its role as
self-fulfilling prophecy. State Farm's own research may indicate as
much. â€œWhat we've gotten out of focus groups is that [Gen X]
feels a sense of ownership, that they should manage and drive their
future and wealth and retirement,â€? State Farm's Mueller says.
â€œThey're not leaving it up to the government. It's not that
they're necessarily scared about the future of Social Security
â€” they've just sort of accepted that it might not be there
for them. It's up to them to do the saving and the investing and
the preparing, and that's really where we can help them.â€?

Whether such potential clients seek some kind of proxy security
to fill voids of broken homes or take their safety net into their
own hands, State Farm is wisely gambling on Gen X. Notably, the
company has used its media to focus on its auto insurance, a
category that any car owner must enter at an early age. Its
strategy is to then use that car as a beachhead: once the
relationship is established, the â€œgood neighborâ€? agent
has the opportunity to establish that all-important trust in a
market segment to which trust is dear. As the young shop manager,
whose outfit coordinates with her retail environs, attests simply
to the viewer of the State Farm spot, â€œMy State Farm agent
showed me all about insurance.â€?

â€œInsurance can be a complex process,â€? says Karen
Noel, advertising manager at State Farm. â€œBut our message is,
â€˜There's somebody here to help you whatever life stage you're
at, and we can help you all the way through.â€™â€?

The 1998 LIMRA report, in fact, found that 41 percent of Gen
Xers said they were â€œlikely to buy life insurance in the next
two years,â€? compared with just 23 percent of Baby Boomers.
More than 40 percent felt underinsured. The big problem, the report
stated, was that young adults did not feel insurance sellers valued
their business enough to approach them with any real understanding
of their needs.

â€œSo many companies are focusing on the â€˜affluent
marketsâ€™ that they forget this is the emerging affluent
market,â€? says Maria Dynia, assistant scientist in technology
research at LIMRA, and author of the 1998 report. â€œThis
market does see the need for insurance, but I don't think they're
being told they're in a great position to buy life insurance and a
lot more, that insurance agents can sell them mutual funds, for
example. There's a big cross-selling opportunity here for companies
that can figure out how to talk to them in their language, with the
kind of multichannel approach that can reach them.â€?

Three years after Dynia's initial report, State Farm's offbeat
entreaty may have filled her prescription to a T, at least in
making its introductions to a wide range of prospects. And these
abruptly perilous times surely have many young people thinking
about security well beyond their cars.